Context

On 9 June 2001 the Act of 22 May 2001 regarding employees’ participation in the company capital or company profit was published in the Official Gazette.

The Act aims to promote the introduction of employee profit participation schemes which are optional for the employees themselves. This will be achieved by companies or groups of companies via a special collective bargaining agreement or via a similar procedure to that for changing the internal works regulations. Employees will be able to receive a part of the after-tax profits either in cash or in shares with normal voting rights.

There will be two limits on how much profit can be paid out to employees: the applicable limit is the lower of 10% of the total salary cost of the company or 20% of the net (after-tax) profits for the year.

Where profits are distributed directly and immediately in cash, the only levies due will be a ‘solidarity contribution’, paid by the employee and equal to the normal personal social security contribution (13.07%), and a special tax withholding of 25%.
If the employee receives shares, this benefit will only be subject to a special tax withholding of 15%, provided the blocking period (a minimum of between two and five years) is adhered to.

News

The above-mentioned special tax regime applies to qualifying employee profit participation plans introduced as from 29 December 2001(date of publishing in the Official Gazette of four Royal Decrees needed for its entry into force). Furthermore the first distributable profits are those of the book year that closes on 31 December 2001 at the earliest.

The fiscal provisions enter into force as from income year 2002.